Eye on eCommerce: Jeff Barnett, COO, Demandware

The adoption of cloud by consumers and businesses alike has been the key to Demandware's growth in the eCommerce market over the last 12 years.

At first cloud was not trusted for critical enterprise applications, but a revolution of cloud providers over the last decade, along with consumer technologies taking advantage, has seen it become part of everyday life.

"Think about how many cloud connected services we use in our daily life on our mobile phone – we're in cloud services every day," says Jeff Barnett, executive vice president and chief operating officer at Demandware.

He says businesses are now trusting the cloud with "mission critical" applications. "It used to be for more tactical applications – sales force automation, expense management, HR, but what's been really different for Demandware is we've led the banner on bringing cloud to enterprise-class business applications."

Sitting down with Essential Retail at Demandware's flagship conference, Xchange '16, in Miami last month, Barnett says the vendor has gained its momentum off the back of cloud's success.

"If your website goes down and you can't take orders from your customer, that's lost revenue to the retailer, so obviously it's a big deal and there was a huge trust barrier in the early days of cloud and it was all about winning that trust and getting those early customers to believe in us."

Founded in 2004 by entrepreneur Stephan Schambach, Demandware now has 331 customers with 1,506 sites across the world, predominantly in the fashion, footwear and beauty sectors.

"Even in North America where we're most penetrated, we're still a relatively small fraction of the market, because most of the market is still on custom solutions and there's a whole other part of the retail economy that hasn't really embraced online yet."

Barnett joined Demandware in the company's infancy. A trained engineer, he soon switched to the business side of technology and became involved in a number of start-ups – Demandware being his fourth. He watched as Salesforce.com entered the market in the late 90s and become one of the first successful SaaS players.

"Suddenly there was this little start-up with an interesting idea called Salesforce, and they [incumbent vendors] didn't take it seriously at first – 'That's the little guys, it's not for the big companies', they said. But little by little, as the story unfolded, Salesforce started stealing really big customers from them and eventually really ate their lunch, what was their dismissal of Salesforce, ultimately became a hatred and became their undoing."

One such company which suffered was CRM technology provider, Siebel, whose share price fell victim to Salesforce's influence on the market and was eventually bought by Oracle.

"So living through that experience a little bit, I was really thinking the software world had changed for a guy growing up in enterprise software," recalls Barnett. "I realised the delivery model of the future – which was what we then called SaaS, but we talk more about cloud today – because it allows you to get benefit to the customer much more quickly."

These days, Demandware is not only fighting against the big guys, like Oracle and IBM, who have finally seen sense in the cloud, but the smaller players including NetSuite and Magento are also shaking up the market.

But Barnett claims Demandware can provide an "Amazon-level of scale and capability" to retailers.

"Broadly – and retailers will only admit this behind closed doors – they view Amazon ultimately as a competitor, because it's been pretty clear it wants to own all retail."

But Barnett says this has actually been really good for business. "You look at the R&D spend for Amazon, which is greater than $10 billion – just on improving technology capabilities, not to mention all the stuff on the supply chain – how can a typical retailer, even the biggest in the world, spend a fraction that what Amazon does? How can the average retailer compete? They can't."

Barnett says Demandware is one of the few eCommerce providers who has the size, transactional volume and leverage at a similar scale to Amazon or Alibaba.

"The beauty of the Demandware proposition is all of the investment we make, every single retailer that signs with us, are armed with that sort of Amazon-level of scale and capability. That's pretty powerful and resonates in the market."

And of course, it is important for Demandware to scale its customers as the vendor operates a revenue share business model.

Data

One of Demandware's most recent and largest investment has been into data. Barnett believes being able to identify customers who shop online and in store is only the tip of the iceberg. "But the reality is, that's a very small picture of that consumer and misses entirely about the customer you don't have yet and the one you want to acquire."

He says in today's digital world it is easier to understand broadly about retail customers. "If a customer comes to your website, even if they are anonymous, you can start to serve them more relevant content and products which are more likely to illicit a response, " he explains. "Amazon taught us all this a few years ago. And they say 30% of their growth annually is driven by the personalised assets."

Barnett says the more retailers can understand about their customer using cookies and other technologies, the more they can put relevant content in front of them which resonates. "Because the attention span is very short in this world," he says. "You can get very substantial gains, we had our own technology with intelligent solutions which we've rolled out, and predictive emails last year, as well as recommendations globally. And depending on the customer, we are seeing very significant upsides, numbers everywhere between 5-7% on the low end to good size double digits of incremental growths."

Mobile

Meanwhile, mobile is still a hot topic on the technology agenda, with smartphone growth accounting for 100% of retail online growth for Demandware customers globally.

"More than 100% of year-on-year growth in visits were driven by mobile – and that's not tablet – the visits from tablets and desktops year-on-year went down."

Barnett points out while the total number of eCommerce visits went down, mobile more than made up for the loss.

"We live on these things all day long and according to recent research we spend 86% of our mobile time in apps, compared to 14% in browsers," he says. "Think about the impact of that, it's completely changing the typical eCommerce retailer, who used to be all about consumers coming to the website via browser, search engine, search marketing and placed ads, but suddenly the consumer is not going through browsers which are loosing influence."

Barnett says retailers have to rethink their entire marketing mix online. Yet if retailers are struggling with budget he insists having a mobile-responsive site developed first is important. "Thinking about your business from a mobile-first perspective is really important and that doesn't just include the website, but how it manifests in store."

As for Barnett, most of his mobile time is spent in the MapMyRun app which was acquired by Under Armour – another client of Demandware.

"I'm a big runner and I like the audio feedback and the community aspects," he says. "It's interesting it follow the evolution of it and now Under Armour is trying to sell products through it – they'll know to message you when you've hit 200 miles on your shoes, saying its time to choose a new pair. Nike is doing the same sort of thing."

Barnett says as a consumer, he doesn't mind exchanging his data to have better value in the form of the app. "They know where I'm running and what I'm doing and the exchange helps them to get to know me and serve me better," he says. "All this concern in the market about data privacy and consumers needing to take control of their personal data – but when you can deliver value like that to the consumer, you break down those barriers."

Looking forward, Barnett's biggest concern is the pace of change in the retail industry.

"As we continue to grow against this very large market opportunity, we just need to make sure we continue to do that really well and not be too comfortable with our success – and that's easy to happen.

"There's some very big software companies trying to have a go at this problem, but we feel like we have a very unique approach," he adds. "But if we spread ourselves really thin and don't really stick to the core of what makes us great, we might lose our way. On the other side of the spectrum, if we stay super narrow and stay focused on eCommerce, we're sort of solving yesterday's problem."